City Holding Company · NASDAQ:CHCO
City — Investor Presentation (November 2015)
46 slides from City's investor presentation, Nov 5, 2015
Slide 1: Philadelphia, PA November 6, 2015
Philadelphia, PA November 6, 2015
Slide 2: Forward looking statements
Forward looking statements This presentation contains certain forward-looking statements that are included pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such information involves risks and uncertainties that could result in the Company's actual resul
Slide 3: City Holding at a glance
• Total Assets $3.5 bil • Branches 82 • FTE 828 • Market Cap $743 mil • Institutional Ownership 63% • Average Daily Volume $2.5 mil Date: October 30, 2015 3
Slide 4: Value in the banking sector?
Value in the banking sector? Checklist for success in current environment: • Markets – Solid distribution network – Stable geographic markets – Disciplined competition • Performance – Strong net interest margin – Strong NIM management – Strong fee income – Ability to control expenses • Growth – Liqu
Slide 5: City Holding Company
City Holding Company • Markets: Operates an extremely strong retail/commercial franchise in stable markets with disciplined competition • Asset Quality: Strong compared to peers and City’s management has recognized and dealt with issues • Performance: Has consistently outperformed peers with respect
Slide 6: City National Markets
City National Markets 1st Branch Share & 2nd Deposit Share (10%) In Charleston MSA/Huntington MSA; $10.5 Billion 1st Branch Share & 31% Deposit Share $2.0 Billion 2nd Branch Share & 2nd Deposit Share (15%) in Staunton MSA $1.4 Billion 2nd Branch Share & 6% Deposit Share in Winchester VA & Morgan, Be
Slide 7: Market Position
Market Position Market Population Deposits ($mm) Deposit Share National/ Regional Banks Deposit Share Branches Branch Share Branch Rank Beckley/Lewisburg WV 175,000 $703 29% 24% 16 25% 1 Huntington/Ashland MSA 365,000 575 11% 27% 19 15% 1 Charleston MSA 240,000 523 10% 60% 11 15% 2 Winchester/Martin
Slide 8: Bank Director ranked City: A High Performing Bank
Bank Director ranked City: CHCO: A High Performing Bank 8 • #3 of largest 150 US banks in 2010 • #8 among US Banks with assets between $1B - $5B in 2011 • #19 among US Banks with assets between $1B - $5B in 2012 • #5 among US Banks with assets between $1B - $5B in 2013 • Named City 10th on the “Nift
Slide 9: ROA
ROA -1.50% -1.00% -0.50% 0.00% 0.50% 1.00% 1.50% 2.00% 2008 2009 2010 2011 2012 2013 2014 2015 YTD CHCO W/O Merger Costs $1B - $5B Peer Data as of June 30, 2015 9
Slide 10: ROTCE
ROTCE -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 2008 2009 2010 2011 2012 2013 2014 2015 YTD CHCO W/O Merger Costs $1B - $5B Peer Data as of June 30, 2015 10
Slide 11: The key to City's success: an enviable deposit franchise
The key to City’s success: an enviable deposit franchise • Branches 82 • Average Deposits per Branch $35 MM • Average Households per Branch 2,000 • Average Deposit Share 12.9% • Average Household Share* 23% * - Excludes Coastal Region 11
Slide 12: Low cost and stable funding
Low cost and stable funding: 12% 15% 18% 10% 9% 18% 11% 4% 2% 0.5% Equity Non Interest DDA Interest DDA Savings MMS CDs Jumbos Customer Repos FHLB Other Trust Preferred Data: September 30, 2015 12
Slide 13: Reported NIM and NIM Excluding Acquisition Accretion
Reported NIM and NIM Excluding Acquisition Accretion, Interest rate floors, and PSL’s: 3.52% 3.00% 3.50% 4.00% 4.50% 5.00% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD $1 to $5B Peer CHCO CHCO excluding PSLs, floors & accretion Peer Data as of June 30, 2015 March 2008 thru June 2011: NIM su
Slide 14: CHCO's sensitivity to interest rate risk
CHCO’s sensitivity to interest rate risk : Immediate Basis Point Change in Interest Rates Estimated Increase or Decrease in Net Income between 1-12 months +400 Bp +3.9% +300 Bp +5.8% +200 Bp +5.5% +100 Bp +2.8% Data: September 30, 2015 Assumes that deposit mix changes as rates rise 14
Slide 15: Strong deposit franchise drives top decile non-interest revenue
Strong deposit franchise drives top decile non-interest revenue: 31.7% 68.3% City Holding Company Non Interest Income Net Interest Income *As of September 30, 2015. Non-interest income excludes investment gains/(losses) & gain from sale of insurance division. Sample of 282 reporting publicly traded
Slide 16: Non-interest income is branch driven
Non-interest income is branch driven: 2009 2010 2011 2012 2013 2014 YTD 2015 Bankcard Revenues $9.0 $9.9 $11.1 $12.4 $13.5 $15.1 $12.0 Service Charges $36.0 $30.1 $27.0 $26.3 $27.6 $26.6 $19.4 Insurance $5.6 $5.5 $5.9 $6.1 $5.8 $6.0 $- Investment Management $2.3 $2.8 $3.1 $3.8 $4.0 $4.6 $3.6 BOLI $3
Slide 17: CityInsurance
CityInsurance • Sold in January 2015 to The Hilb Group • Resulted in a one-time after-tax gain of $5.8 million recognized in Q1 2015 • CityInsurance had revenues of $6.0 million and expenses of $4.2 million during 2014 • CityInsurance had 43 FTE’s at December 31, 2014 • City’s decision to sell was d
Slide 18: Noninterest Income/Total Revenues
Noninterest Income/Total Revenues 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 2008 2009 2010 2011 2012 2013 2014 2015 YTD CHCO $1B - $5B Peer Data as of June 30, 2015 18
Slide 19: Efficiency Ratio
Efficiency Ratio 40.0% 50.0% 60.0% 70.0% 2008 2009 2010 2011 2012 2013 2014 2015 YTD CHCO $1B - $5B Data as calculated using SNL Financial definition. Peer data as of June 30, 2015. 19
Slide 20: Charge-off trends
Charge-off trends: 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 2008 2009 2010 2011 2012 2013 2014 2015 YTD Net Charge-off % Industry Source: FDIC, All Insured Depository Institutions Peer data as of June 30, 2015 20
Slide 21: Non-performing assets
Non-performing assets: 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% NPA/Assets Industry Source: FDIC, All Insured Depository Institutions Peer data as of June 30, 2015 21 Coal related 21% Acquisitions 19% Other 60%
Slide 22: Growth: positioned to achieve reasonable growth in core franchise
Growth: CHCO is positioned to achieve “reasonable growth” in its core franchise • Commercial • Retail Lending • Trust & Investment Management • Deposits 22
Slide 23: Commercial loan growth
Commercial loan growth: Success achieved due to community bank orientation, strong team, strong underwriting, and strong local economies -4.00% -2.00% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD Growth percentages exclud
Slide 24: Retail loan growth
Retail loan growth Adjustable Rate Mortgages, Home Equity Loans, Installment credit $1,000 $1,100 $1,200 $1,300 $1,400 $1,500 $1,600 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Loans $M M Residential Real Estate Home Equity (Junior Liens) Consumer 24
Slide 25: Commercial Loan Growth targeted to new markets
Commercial Loan Growth targeted to new markets Key Loan Markets Percent of Commercial Portfolio Core West Virginia Markets 52% Virginia/Eastern Panhandle Markets 20% Charlotte LPO 8% Lexington, KY 11% Columbus, OH 5% Pittsburgh, PA 4% 25
Slide 26: Trust AUM & Revenues: Strong growth
Trust AUM & Revenues: Strong growth AUM CAGR 11.3% and Revenue CAGR 9.3% (Dec 31, 2006-Sept 30, 2015) $- $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD R e ve n u e s A UM $M M AUM (MM$) Revenues 26 2015
Slide 27: Deposit growth opportunity
Deposit growth opportunity: CHCO has many small deposit relationships; peers tend to have larger commercial & public deposits Branches Deposits Deposits/Branch CHCO 82 $ 2.9 B $35 million BBT 64 $ 4.9 B $77 million UBSI 31 $ 1.9 B $61 million JPM 19 $ 1.3 B $68 million HBAN 14 $ 1.0 B $72 million In
Slide 28: Tangible Common Equity
Tangible Common Equity: strong following 2 acquisitions in 2012 & 2013 6.00% 7.00% 8.00% 9.00% 10.00% 11.00% TCE/TA TCE/TA 28
Slide 29: Share Count
Share Count: 12,000,000 13,000,000 14,000,000 15,000,000 16,000,000 17,000,000 18,000,000 19,000,000 Average Shares Outstanding 29
Slide 30: Growth per share
Growth per share (12/31/10 – 9/30/15): • Loans per share: 8.5% CAGR • Deposits per share: 6.7% CAGR • Non-interest inc per share: 0.5% CAGR • Expenses per share*: 4.4% CAGR Implication: While CHCO operates in relatively low growth markets, high profitability allows share repurchases, which have driv
Slide 31: An experienced management team
An experienced management team TITLE EXPERIENCE AGE JOINED CEO PPLS; CHCO CFO; PHD 53 2001 EVP – Retail PPLS 59 2001 EVP – Commercial One Valley; BB&T, CPA 65 2004 CFO Public Accounting, CPA 50 2005 SVP - Operations CHCO 51 1989 SVP - Branches Cardinal 44 2013 SVP – Branches BB&T 47 2001 SVP – CCO U
Slide 32: Impending Branch Acquisition
Impending Branch Acquisition • 3 branches from American Founders Bank • Lexington, Kentucky • Strong Demographics – Projected 5 year population change – 4.3% – Population younger, wealthier, and better educated • AFB acquired the branches in 2007. • Deposits of $164MM (3/31/2015) • Loans of approxim
Slide 33: Acquisition philosophy
Acquisition philosophy: • Historically less acquisitive than peers • Acquisitions must truly be strategic or meaningfully accretive • Opportunities have increased • Actively looking: • In-market • Adjacent market • Growth markets • Size: Generally $100MM to $1B 33
Slide 34: Acquisitions in-territory
n territory: > Acquisitio le om 4
Slide 35: Acquisitions in Growth Markets
Acquisitions in Growth Markets 35
Slide 36: Virginia Savings Bank
Virginia Savings Bank • Closed May 31, 2012 • 5 branches in Virginia • $73 million in loans • $123 million in deposits • 5,700 households • Regional population of 185,000 • Regional Households of 72,000 • Projected Population growth of 5.0% over 5 yrs • Our primary competitors in this market are BB&
Slide 37: Community Bank
Community Bank • Closed January 10, 2013 • 10 branches in Virginia – Eight Branches in Staunton, VA region • Population of 205,000 • Households of 79,000 • Competitors: STEL, BBT, STI, BOA, UBSI – Two Branches in Virginia Beach Region • Population of 1.7 million • Households of 625,000 • $410 millio
Slide 38: Retail Enhancements in Virginia
Retail Enhancements in Virginia • 70% of Virginia Branches acquired are unprofitable due to low retail loan balances – Solution: Originate More Retail Loans • Under CHCO, Retail Loan Production: $39MM in 2013 • $47MM in 2014 – Was not a focus for predecessors due to liquidity constraints – Significa
Slide 39: Retail Enhancements in Virginia
Retail Enhancements in Virginia • Closed Harrisonburg Branch (Feb 2013) – Had 288 households; Primarily Indirect Auto Focus • Closed Lake James Branch (Dec 2013) – Had 981 households • Indirect Auto Loans – down $18.8MM (91%) since January 2013 – Scale business – Unacceptable risk-return balance • R
Slide 40: Financial Impact of Acquisitions
Financial Impact of Acquisitions: VSB - Before VSB – After Community – Before Community - After Branches 5 5 11 9 FTE 48 32 (-33%) 153 60 (-60%) Loans^ $73 MM (Mar 12 Call) $86 MM $371 MM $302 MM * Deposits $120 MM $144 MM $385 MM $293 MM ** Expenses $4.7 MM (2011) $2.7 MM (-42%) (2014) $14.7 MM (20
Slide 41: Accretion from Acquisitions
Accretion from Acquisitions $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 $20,000 2012 2013 2014 2015 2016 2017 Historical Forecasted 41
Slide 42: Industry Challenges in 2015
Industry Challenges in 2015: • Economic Activity & Loan Growth • Mortgage Banking Slowdown • Branch Fees are stagnant • Loan Competition – Terms & Price • Regulatory Compliance • Future Regulatory Agenda 42 Challenges specific to CHCO: • Downturn in Mining
Slide 43: CHCO overcomes challenges thru
CHCO overcomes challenges thru: • Excellent distribution network • Exceptional Customer Depth driving strong non-interest income • Markets characterized by disciplined competition • Industry leading profitability achieved from strong non-interest income and discipline in managing expenses • Strong l
Slide 44: CHCO represents good value and stability
CHCO represents good value and stability • Pricing Metrics*: • Price to Book: 175% • Price to Tangible Book: 210% • Price to 2016 Projected Earnings** 15.3x • Dividend Yield 3.5% • Div Payout Ratio** 49% • Tangible Capital/Tangible Assets*** 10.14% • Institutional Ownership 63% * Based on Price of $
Slide 45: Average Daily Volume and Short Position in CHCO
Average Daily Volume and Short Position in CHCO 0 10 20 30 40 50 60 70 80 90 100 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 Da y s t o Co v e r A v er a ge Dail y V ol u m e Volume Days to cover At October15, 2015: 1,134,983 shares shorted 15,320,850 shares outstanding 45
Slide 46: Cash Dividends/Share Declared & Dividend Payout Ratio
Cash Dividends/Share Declared & Dividend Payout Ratio 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 $1.60 $1.80 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 D ivide n d P ay ou t R at io Ca sh D ivide n d s/